Chennai Water Desalination Ltd Vs Chennai Metropolitan Water Supply and Sewerage Board (Madras High Court)
Held that impugned award set aside as the same was passed rejecting the counter claim, which was duly filed within the time limit, as being time barred.
Facts-
A contract was entered into between the petitioner (contractor) and the respondent. After certain disputes arose between the parties, the petitioner invoked the Arbitration Clause and the disputes were referred to arbitration. The Arbitral Tribunal passed an award rejecting the claims made by the respondent, including a claim for Liquidated Damages, on the ground that they were time barred. Further, the counter claims made by the petitioner were also rejected by the Tribunal as being barred by limitation. The petitioner challenged the arbitral award before the Madras HC u/s. 34 of the Arbitration and Conciliation Act, 1996 (A&C Act), on the ground that the counter claims made by it were not barred by limitation.
Conclusion-
The principle laid down in Voltas Limited Vs. Rolta India Limited case is that in the case of counter claim if the respondent before an AT has invoked the arbitration clause and if the invocation is within the meaning of Section 21 of A & C Act, that would be the reckoning date to decide the limitation and if a respondent before an AT has not resorted to invocation of arbitration agreement, then the date on which the counter claim is filed before AT would be the relevant date. In the case on hand, it will be clear that the Contractor (Contractor was respondent before AT) invoked the arbitration clause in and by letter dated 27.04.2011, which was received by CMWSSB on 18.05.2011. In this regard, it is necessary to refer to Section 21 of A & C Act.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
Captioned ‘Original Petition’ [‘OP’ for the sake of convenience and clarity] was presented in this Court on 08.01.2018 under Section 34 of ‘The Arbitration and Conciliation Act, 1996 (Act No.26 of 1996)’, which shall hereinafter be referred to as ‘A and C Act’ for the sake of brevity, assailing an arbitral award dated 09.10.2017 made by a three member Arbitral Tribunal.
2. This 09.10.2017 arbitral award being a unanimous award made by a three member ‘Arbitral Tribunal’ [‘AT’ for the sake of brevity] shall hereinafter be referred to as ‘impugned award’ for the sake of brevity, convenience and clarity.
3. There have been multiple listings of captioned main OP before this Court and proceedings made by me in the listing on 15.03.2021 captures the crux and gravamen of the captioned main OP. This 15.03.2021 proceedings reads as follows:
‘Mr.R.Murari, learned senior advocate instructed by Ms.Hema Srinivasan, counsel on record for sole petitioner and Mr.S.R.Rajagopal, learned Additional Advocate General instructed by Mr.G.Janakiraman, Standing Counsel for Chennai Metropolitan Water Supply and Sewerage Board (CMWSSB) are before me.
2. The impugned award is dated 09.10.2017 and the same has been made by an ‘Arbitral Tribunal’ (‘AT’ for the sake of brevity) constituted by three Hon’ble Arbitrators. To be noted, it is an unanimous award.
3. The contractor, who was respondent before AT, is the petitioner in captioned OP and CMWSSB, the employer which was claimant before AT, is the respondent in captioned OP.
4. The fulcrum of the lis or in other words, the epicentre of the lis is an agreement dated 13.09.2005, which is described as ‘Bulk Water Purchase Agreement’ (‘BWPA’ for brevity).
5. The entire matter turns on limitation.
6. In a nutshell inter alia vide Paragraph 54 of the impugned award AT has held CMWSSB’s claim to be time barred. The lis was therefore not examined on merits.
7. Likewise, vide Paragraphs 56 and 57, AT has held the counter claim of the contractor to be time barred. For convenience, it is recorded that in Paragraph 57 Hon’ble AT has extracted a paragraph from case law of Hon’ble Supreme Court and has mentioned that the same is an extract from Praveen Enterprises case law being law laid down by Hon’ble Supreme Court in State of Goa Vs. Praveen Enterprises reported in (2012) 12 SCC 581, but the extract is actually from Voltas Limited Vs. Rolta India Limited case law reported in (2014) 4 SCC 516. To be noted, what has been extracted in Paragraph 57 of the impugned award is not from Praveen Enterprises , but is part of paragraph 28 of Rolta Vs. Voltas.
8. There is no disputation or disagreement before this Court that CMWSSB, which was the claimant before AT, has not assailed the impugned award.
9. Likewise, case file placed before me reveals that captioned OP which is at the instance of the contractor, who was respondent before AT, is a limited challenge, limited to the AT dismissing the counter claim of the contractor as time barred. Learned senior counsel submits that this is based on J.G.Engineers principle, being principle laid down by Hon’ble Supreme Court in J.G.Engineers Private Limited Vs. Union of India and another reported in (2011) 5 SCC 758. Relevant paragraph in J.G.Engineers case law is paragraph 25.
10. In the aforesaid backdrop, learned senior counsel submitted that return of the bank guarantee is a sequittur to the claim of the employer CMWSSB being held to be time barred, but learned Additional Advocate General submits that this position is incorrect and he would argue that captioned OP is liable to be dismissed notwithstanding the aforementioned paragraph 54 of impugned award.
11. The above has been recorded only for the limited purpose of recap in the ensuing listing.
List on 29.03.2021.’
4. Aforementioned 15.03.2021 proceedings shall be read as an integral part and parcel of this order. This means that the abbreviations, short forms and short references used in aforementioned 15.03.2021 proceedings will continue to be used in the instant order also for the sake of convenience and clarity.
5. Before proceeding further, this Court deems it appropriate to mention that Section 17 (captioned ‘GOVERNING LAWS AND DISPUTES’) of BWPA dated 13.09.2005 is the arbitration clause and the same reads as follows:
‘ Section 17: GOVERNING LAWS AND DISPUTES
17.1 Governing Law and Jurisdiction
This Agreement shall be construed and interpreted in accordance with and governed by the laws in the State of Tamil Nadu and Laws of India and the Courts in Tamil Nadu shall have jurisdiction over all matters arising out of or relating to this Agreement.
2.Dispute and Resolution
17.2.1 Save where expressly stated to the contrary in this Agreement, any dispute, difference or controversy of whatever nature howsoever arising under, out of or in relation to this Agreement including non completion of the Facility, between the Parties and so notified in writing by either Party to the other (the “Dispute”) In the first instance shall be attempted to be resolved amicably in accordance with the conciliation procedure set forth below in this Section 17.2.
17.2.2.Each party:
i. Shall select and appoint one or two high-level representative(s) not concerned with the day to day performance of their appointer’s obligations under this Agreement to sit on a panel (the “Panel” as soon as reasonably practicable before financial Close;
ii. Shall notify the other of the name and relevant qualifications of the Panel member(s) it has selected within thirty (30) days of their selection; and
iii. May appoint substitute or replacement Panel members from time to time and shall notify the other of the name and relevant qualifications of the substitute or replacement Panel members so appointed within thirty (30) days of their appointment.
17.2.3. The Panel shall conduct the mediation in English, in Chennai, as it thinks fit, guided by the principles of equity and justice.
17.2.4. The Parties to the Dispute shall exchange, within fourteen (14) days of the Dispute being referred to the Panel, mediation briefs in English with principal supporting documentation summarising their respective cases and deliver copies of the briefs to the Panel. 17.2.5. The Panel may at any time during the mediation process request a Party to the Dispute to submit to it such additional information as it deems necessary.
17.2.6. The Panel shall fix a date for the mediation hearing at the earliest convenient date and in any event within thirty (30) days of the Dispute being referred to the Panel. Each meeting before the Panel would be attended by representatives of the Parties to the Dispute with full settlement authority.
17.2.7. At the mediation hearing, each of the parties to the Dispute (who may be represented) will first give a brief presentation of its position to the Panel following which the Panel will then proceed to mediate the Dispute in accordance with the provisions of Section 17.2.3.
17.2.8. The Panel will (unless a settlement has already been achieved between the parties to the mediation) produce a nonbinding recommendation.
17.2.9. If a settlement is achieved, the Parties to the Dispute will draw up a appropriate settlement agreement (in relation to which the Panel may be called upon to assist).
17.2.10. No agreement as to the terms of any settlement reached during any mediation hearing shall be legally binding unless and until it is reduced to writing and signed by the duly authorized representatives of the Parties to the Dispute.
17.2.11.Any Party to the Dispute may at any time serve notice on the other(s) that it is withdrawing from the mediation process, in which event the Panel will cease hearing, and will cease to have any authority or responsibility in relation to the Dispute.
17.2.12. The Panel’s deliberation and recommendation will be confidential and without prejudice to any subsequent judicial or arbitration proceedings and unless the Parties to the Dispute otherwise agree, the members of the Panel shall not act or appear in any judicial or arbitration proceedings, whether as an arbitrator, representative of a party or as a witness.
17.2.13. The Parties to any Dispute shall not, in any judicial proceedings:
i. introduce any concessions or admissions made by any other Party to the Dispute or regarding any possible settlement, or the fact that another Party to the Dispute had incited a willingness to adopt a proposal put forward by the Panel; or
ii. Refer to any settlement proposals as having been made or recommended by the Panel.
17.2.14. Save and to the extent that a settlement provides otherwise, the costs of the Panel and the costs of the mediation process will be borne equally by the Parties to the Dispute and each of the Parties to the Dispute will bear its own costs.
17.2.15 In the event that any such Dispute is not settled by the Parties to the Dispute through the mediation process;
i. a Party to the dispute does not accept the Panel’s recommendation (in whole, or in party) or
ii. A Party to the Dispute gives notice of withdrawal pursuant to Section 17.2.11
then any Party to the dispute may refer to the dispute (or the relevant part thereof) to arbitration in accordance with Section 17.3. 17.3 Arbitration
i. The Dispute shall be submitted to arbitration at the request of either Party upon written notice to that effect to the other Party (a “Notice of Reference”) and be finally determined in accordance with the provisions of the UNCITRAL Rules of International Arbitration (“Rules”) subject to the Arbitration and Conciliation Act, 1996 and any statutory modification thereto from time to time.
ii. The place of arbitration shall be Chennai in the state of Tamil Nadu, India and the Arbitration will be governed by the provisions of Indian Laws and the Arbitration and Conciliation Act, 1996;
iii. The decision of the arbitrator(s) shall be final and binding on the Parties.
iv. The arbitrator(s) shall reasonably decide the proportion in which arbitration fees and costs are to be shared by the Parties.
v. The arbitrator(s) may, with the consent of the Parties, extend the time taken to make and publish the award.
Notwithstanding the existence of any disputes referred to arbitration, the Parties shall continue to perform their respective obligations under this Agreement and the Parties shall not withhold, for any reason whatsoever including pendency of arbitration proceeding, payment of any amount which has become due under this Agreement.’
6. The aforementioned Section 17 of BWPA (BWPA dated 13.09.2005), which is the primary contract serves as arbitration agreement between the parties is a matter over which there is no disputation before this Court. In other words, aforementioned Section 17 of BWPA is the arbitration agreement i.e., ‘arbitration agreement’ within the meaning of Section 2(1)(b) read with Section 7 of A and C Act between the parties is the common say of learned counsel on both sides. To be noted, Ms.Hema Srinivasan along with Ms.N.Umayaparvathi for the petitioner [Chennai Water Desalination Ltd.,], which shall hereinafter be referred to as ‘Contractor’ for the sake of convenience, clarity and Mr.P.Kumaresan, learned Additional Advocate General for Mr.Gautam S.Raman, learned Standing Counsel for CMWSSB are before this Court and therefore, this is the common say of these two learned counsel on both sides.
7. Though the case file is mammoth and very many issues have been raised before AT in the impugned award, the entire matter turns on an extremely narrow and short compass in the captioned main OP as would be evident from the aforementioned 15.03.2021 proceedings. To elaborate a little more on this, CMWSSB, which was claimant before AT, made a claim of a little over Rs.106 Crores (Rs.106,50,38,342/- to be precise) made up of three components, namely damages for delay in work, Liquidated Damages and damages for delay on account of financial closure (Rs.5,00,00,000/-, Rs.37,50,00,000/- and Rs.64,00,38,342/-). The entire claim of CMWSSB was negatived and rejected by AT in and by the impugned award primarily on the ground that it is barred by limitation. Learned Additional Advocate General submits that the impugned award has been given legal quietus by CMWSSB. In other words, CMWSSB accepts the impugned award and it is submitted that the impugned award has not been assailed by CMWSSB.
8. On the contrary, Contractor, who was respondent before AT, made counter claim in a sum of Rs.5 Crores being release of Bank Guarantee which was given by the Contractor qua Liquidated Damages, which is governed by Sections 5 and 7.4 of BWPA captioned ‘SECURITY’ and ‘Liquidated Damages for Delay in Commissioning’ respectively. The impugned award has rejected the counter claim of the contractor also on the ground that the counter claim is also barred by limitation. Contractor has assailed that portion of the impugned award which rejects the counter claim by saying that the counter claim of contractor is not barred by limitation. This is the reason why this Court (as delineated supra) deems it appropriate to say that the captioned main OP turns on a very narrow compass.
9. The short point that needs to be tested in the captioned main OP is whether the counter claim of the Contractor is time barred. To test this one question, a short contemporary chronicle is required. Several list of dates were placed before this Court in the course of multiple listings and list of dates (ironically) captioned ‘UPDATED LIST OF DATES’ dated 18.07.2022 has been placed before this Court (filed on 18.07.2022). This updation of dates was done based on the questions that fell from this Bench in the course of the arguments. The contemporary chronicle as can be culled out from the updated list of dates is as follows:
